New York: Oil prices surged for a second straight day on Friday amid an equities rally on hopes of extra stimulus for Japan and the Eurozone.
US benchmark West Texas Intermediate (WTI) for March leapt $2.66 (nine per cent) to $32.19 a barrel on the New York Mercantile Exchange.
Brent North Sea crude for delivery in March, the European benchmark for crude oil, finished at $32.18 a barrel in London, a 10 per cent jump over Thursday’s settlement.
The gains over Thursday and Friday amounted to 13.5 per cent for WTI and 15.4 per cent for Brent. They capped a volatile week that pushed prices Wednesday to their lowest in more than 12 years.
Equities and crude oil prices began rebounding Thursday after European Central Bank chief Mario Draghi suggested further stimulus measures may be forthcoming in March to boost the Eurozone economy.
Reinforcing optimism over potentially stronger growth was a report Friday by the Nikkei business newspaper that the Bank of Japan is considering similar moves.
“We’ve seen a significant rally first off due to comments from Draghi and the market anticipating additional economic stimulus packages” aimed at kick-starting demand, said Andy Lipow of Lipow Oil Associates.
“We may not be totally out of the woods but I think we’re seeing a return of confidence,” said Price Futures Group analyst Phil Flynn.
“I don’t think that the 30 per cent drop that we saw in the beginning of the year was really justified by the fundamentals, because most of the bearish arguments that apparently drove the market down should have been priced in,” he said.
“What drove the market down was fear,” Flynn said.
“It’s fear that demand is going to slow further because of the slowdown in China, but if you look at the Chinese demand numbers they haven’t slowed yet, their imports are at a record high.”
Lipow predicted the first quarter will be quite difficult as Iranian crude oil exports return to the market after international sanctions were lifted last weekend.
“Combined with refinery maintenance here and in Europe I expect that crude oil inventories will continue to rise over the next couple of months,” he said.
“However as we make it through the first quarter, I expect crude oil prices to stabilise and begin rising during the balance of the year.”